Just 9% of respondents’ organisations do not offer any benefits through a salary sacrifice arrangement, according to the Employee Benefits/Staffcare Benefits research 2017. This compares to 15% of respondents that said the same in 2016.
The fall in the proportion of respondents that do not offer any benefits via salary sacrifice can be attributed to a rise in the number of organisations that offer benefits through this arrangement to some staff year on year; this stands at 11% in 2017, up from 7% in 2016.
More than three-quarters (80%) of respondents offer benefits through a salary sacrifice arrangement to all staff, which has changed little since 2010, when 78% of respondents did so. Ten years ago, however, less than two-thirds (60%) offered benefits through a salary sacrifice arrangement to all employees.
The proportion of respondents that offer benefits through a salary sacrifice arrangement
Sample: All respondents (189)
They do to all staff 80%
They do to some staff 11%
They do not 9%
These results come against a backdrop of change. In the Autumn Statement 2016, Chancellor Philip Hammond confirmed the government’s intention to limit the range of benefits that provide tax and national insurance contribution (NIC) advantages when offered through a salary sacrifice arrangement.
Benefits in kind (BIKs) with a cash allowance option and flexible benefits schemes with a cash option are subject to the changes, which came into effect on 6 April 2017. Some benefits are exempt, including pensions, ultra-low emission vehicles (ULEVs), childcare, and bikes-for-work schemes.
Arrangements entered into before 6 April for company car schemes, accommodation, and school fees will be protected until April 2021, and all other benefits will be protected until April 2018 unless the arrangement is subject to variation.
Almost a third (32%) of respondents say that the new legislation does not impact benefits strategy because the benefits their organisations offer through a salary sacrifice arrangement are exempt from the changes.
Yet, 17% of respondents either have or will review their benefits strategy in light of the changes to salary sacrifice, and a fifth (20%) of respondents have or will change the mechanism by which they offer benefits affected by the changes.
Just 7% of respondents will stop offering benefits that no longer attract tax and national insurance advantages, while 5% have taken or intend to take additional measures to offset any potential effect on employee engagement resulting from the changes to salary sacrifice.
Interestingly, no respondents saw an increase in take up of affected benefits ahead of the April 2017 cut-off date.
The impact that the changes to salary sacrifice arrangements will have on respondents’ benefits strategy
Sample: All respondents that offer benefits through a salary sacrifice arrangement (168)
None, the benefits they offer through a salary sacrifice arrangement are exempt from the changes 32%
They have/will change the mechanism by which they offer benefits affected by the changes 20%
They have/will communicate the changes to salary sacrifice arrangements to staff 17%
They have/will review their benefits strategy in light of the changes to salary sacrifice 17%
They will no longer offer benefits that will cease to provide tax and national insurance advantages 7%
They have/will take additional measure to combat any potential dip in engagement that results from the changes to salary sacrifice 5%
They have/will offer additional benefits in place of those benefits affected by the changes to salary sacrifice 1%
The top three benefits offered through a salary sacrifice arrangement at April 2017 are childcare vouchers (95%), bikes-for-work schemes (79%), and pension contributions (75%). These three benefits have consistently been the top three to be offered through a salary sacrifice arrangement since 2009.
However, the sands are shifting for childcare vouchers. The government’s tax-free childcare scheme is being rolled out gradually from 28 April 2017, with all eligible parents expected to be brought into the scheme by the end of this year. The existing childcare voucher scheme is set to close to new entrants from April 2018.
The results of this year’s survey also reveal an increase in holiday trading schemes; more than two-fifths (42%) of respondents offer holiday trading through a salary sacrifice arrangement in 2017, compared to 36% in 2016.
The tax-efficient benefits respondents’ organisations offer through a salary sacrifice arrangement at April 2017 when the government’s plans to limit the range of benefits that attract tax and employer national insurance advantages will begin to come into effect
Sample: All respondents that offer benefits through a salary sacrifice arrangement (169)
Childcare vouchers 95%
Bikes-for-work scheme 79%
Pension contributions 75%
Holiday trading 42%
Give-as-you-earn/payroll giving 37%
Health screening 25%
Gym membership 21%
Cars 20%
Group income protection 15%
Mobile phones 8%
Subscriptions (professional bodies) 5%
Car parking 4%
Training courses 2%
Subscriptions (publications) 1%
Other 5%
